Not as rosy as it seems
On the surface Ascendis Health’s results look really good, with revenue up 64% on the back of three acquisitions and normalised HEPS up 29% (normalised as the company strips out the cost of the acquisitions). But digging deeper, one can see that things look less rosy, with organic revenue growth only 3%. After inflation, which was likely 5% to 8%, revenue growth is actually negative. Like-forlike working capital increased by some 13%, suggesting increased stock holdings in the original core business before acquisitions. Considering that its products should be fairly resilient to economic conditions, that is a bad growth number and, coupled with retailers Clicks and Dis-Chem reporting real sales growth, suggests all is not well with the core business. As Ascendis is trading at around 2 000c and a price-to-earnings (P/E) ratio of 23 times, the value is fair except for the concerns above. I would not be comfortable if I was holding the share.